Question

Equivalent Units of Production: Average Cost Method

The following information concerns production in the Finishing Department for May. The Finishing Department uses the average cost method.

ACCOUNT Work in Process—Finishing Department					ACCOUNT NO.
Date		Item	Debit		Credit		Balance
							Debit		Credit
May	1	Bal., 15,500 units, 70% completed					62,000
	31	Direct materials, 76,000 units	185,440				247,440
	31	Direct labor	115,000				362,440
	31	Factory overhead	116,800				479,240
	31	Goods transferred, 80,600 units			461,032		18,208
	31	Bal., ? units, 35% completed					18,208

a. Determine the number of units in work in process inventory at the end of the month.
units

b. Determine the number of whole units to be accounted for and to be assigned costs and the equivalent units of production for May.

Whole units	units
Equivalent units of production	units

Cost of Production Report

The debits to Work in Process—Roasting Department for Morning Brew Coffee Company for August, together with information concerning production, are as follows:

Work in process, August 1, 900 pounds, 50% completed				$3,465*
	*Direct materials (900 X $3.2)	$2,880
	Conversion (900 X 50% X $1.3)	585
		$3,465
Coffee beans added during August, 28,000 pounds				88,200
Conversion costs during August				38,458
Work in process, August 31, 1,400 pounds, 30% completed				?
Goods finished during August, 27,500 pounds				?

All direct materials are placed in process at the beginning of production.

a. Prepare a cost of production report, presenting the following computations:

1. Direct materials and conversion equivalent units of production for August.
2. Direct materials and conversion costs per equivalent unit for August.
3. Cost of goods finished during August.
4. Cost of work in process at August 31.

If an amount is zero, enter in "0". For the cost per equivalent unit, round your answer to two decimal places.

Morning Brew Coffee Company
Cost of Production Report-Roasting Department
For the Month Ended August 31
Unit Information
Units charged to production:
Inventory in process, August 1
Received from materials storeroom
Total units accounted for by the Roasting Department
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials (1)	Conversion (1)
Inventory in process, August 1
Started and completed in August
Transferred to finished goods in August
Inventory in process, August 31
Total units to be assigned costs
Cost Information
Cost per equivalent unit:
		Direct Materials	Conversion
Total costs for August in Roasting Department		$	$
Total equivalent units
Cost per equivalent unit (2)		$	$
Costs assigned to production:
	Direct Materials	Conversion	Total
Inventory in process, August 1			$
Costs incurred in August
Total costs accounted for by the Roasting Department			$
Costs allocated to completed and partially completed units:
Inventory in process, August 1 balance			$
To complete inventory in process, August 1	$	$
Cost of completed August 1 work in process			$
Started and completed in August
Transferred to finished goods in August (3)			$
Inventory in process, August 31 (4)
Total costs assigned by the Roasting Department			$

b. Compute and evaluate the change in cost per equivalent unit for direct materials and conversion from the previous month (July). If required, round your answers to the nearest cent.

	Increase or Decrease	Amount
Change in direct materials cost per equivalent unit		$
Change in conversion cost per equivalent unit		$

Answer 1

1
a
Number of units in work in process inventory at the end of the month = 15500+76000-80600= 10900
b
Whole units = 15500+76000= 91500 units
Equivalent units of production = 80600+(10900*35%)= 84415 units
2
Morning Brew Coffee Company
Cost of Production Report-Roasting Department
For the Month Ended August 31
Unit Information
Units charged to production:
Inventory in process, August 1			900
Received from materials storeroom			28000
Total units accounted for by the Roasting Department			28900
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials	Conversion
Inventory in process, August 1	900	0	450
Started and completed in August	26600	26600	26600
Transferred to finished goods in August	27500	26600	27050
Inventory in process, August 31	1400	1400	420
Total units to be assigned costs	28900	28000	27470
Cost Information
Costs per equivalent unit:
		Direct Materials	Conversion
Total costs for August in Roasting Department		88200	38458
Total equivalent units		28000	27470
Cost per equivalent unit		3.15	1.40
Costs charged to production:
	Direct Materials	Conversion	Total
Inventory in process, August 1			3465
Costs incurred in August			126658
Total costs accounted for by the Roasting Department			130123
Cost allocated to completed and partially completed units:
Inventory in process, August 1 balance			3465
To complete inventory in process, August 1	0	630	630
Cost of completed August 1 work in process			4095
Started and completed in August	83790	37240	121030
Transferred to finished goods in August			125125
Inventory in process, August 31	4410	588	4998
Total costs assigned by the Roasting Department			130123
b
	Increase or Decrease	Amount
Change in direct materials cost per equivalent unit	Decrease	0.05	=3.2-3.15
Change in conversion cost per equivalent unit	Increase	0.10	=1.4-1.3

Answer 2

 

Beginning work in process   inventory	6,000 items, 1/4 complete
Units placed in production	14,000 units
Units completed	17,000 units
Ending work in process inventory	3,000 items, 50% complete
Cost of beginning work in process	P36,000
Direct material costs, current	42,000
Conversion costs, current	P68,000

 

Direct materials are placed into production at the beginning of the process and conversion costs are incurred evenly throughout the process.

 

Required:

Prepare a production cost worksheet using the FIFO method.